Correlation Between New England and New Concept

Can any of the company-specific risk be diversified away by investing in both New England and New Concept at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining New England and New Concept into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between New England Realty and New Concept Energy, you can compare the effects of market volatilities on New England and New Concept and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in New England with a short position of New Concept. Check out your portfolio center. Please also check ongoing floating volatility patterns of New England and New Concept.

Diversification Opportunities for New England and New Concept

0.05

Correlation Coefficient

New England  New Concept

Significant diversification

The 3 months correlation between New and New is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding New England Realty and New Concept Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Concept Energy and New England is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on New England Realty are associated (or correlated) with New Concept. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Concept Energy has no effect on the direction of New England i.e., New England and New Concept go up and down completely randomly.

Pair Corralation between New England and New Concept

Considering the 90-day investment horizon New England Realty is expected to generate 1.13 times more return on investment than New Concept. However, New England is 1.13 times more volatile than New Concept Energy. It trades about 0.28 of its potential returns per unit of risk. New Concept Energy is currently generating about 0.07 per unit of risk. If you would invest  7,720  in New England Realty on October 27, 2024 and sell it today you would earn a total of  580.00  from holding New England Realty or generate 7.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	42.11%
Values	Daily Returns

New England Realty  vs.  New Concept Energy

New England Realty

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days New England Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, New England is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

New Concept Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New Concept Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, New Concept is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with New England and New Concept

The main advantage of trading using opposite New England and New Concept positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New England position performs unexpectedly, New Concept can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in New Concept will offset losses from the drop in New Concept's long position.

The idea behind New England Realty and New Concept Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Share Portfolio module to track or share privately all of your investments from the convenience of any device.